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Title 18. Public Revenues
Division 2. State Board of Equalization—Business Taxes
Chapter 2. Use Fuel Tax

Fuel includes any combustible gas or liquid, by whatever name the gas or liquid may be known or sold, of a kind used in an internal combustion engine for the generation of power to propel a motor vehicle on the highways, except fuel that is subject to the tax imposed by the Motor Vehicle Fuel License Tax Law and the Diesel Fuel Tax Law. For example, fuel includes, but is not limited to, liquefied petroleum gases, kerosene, distillate, stove oil, natural gas in liquid or gaseous form, and alcohol fuels. "Alcohol fuel" includes: ethanol (ethyl alcohol), methanol, (methyl alcohol), or blends of gasoline and alcohol (including any denaturant) containing 15 percent, or less, gasoline by volume measured at 60 degrees Fahrenheit.

The taxable unit for liquid natural gas and other liquid fuels is the United States gallon, which is 231 cubic inches. To convert liters to gallons, the quantity of liters shall be multiplied by .26417 to determine the equivalent quantity in gallons. The resulting figure should be rounded to the nearest tenth of a gallon.

History: Effective January 1, 1949.

Amended effective October 12, 1966.

Amended December 8, 1970, effective January 15, 1971.

Amended April 9, 1980, effective June 19, 1980. Added liter-to-gallon conversion factor in last two sentences.

Amended July 28, 1982, effective December 5, 1982. Added last sentence to first paragraph referring to gas—alcohol blends, ethanol and methanol, deleted reference to Business and Professions Code Section 12302 in last paragraph.

Amended December 9, 1998, effective May 20, 1999 added "and the Diesel Fuel Tax Law" after "the Motor Vehicle Fuel License Tax Law" in first sentence; deleted "diesel fuel", removed the "and" after "stove oil", and added "and alcohol fuels" after "gaseous form" in second sentence; and replaced "On and after January 1, 1982, fuel" with "Alcohol fuel" in third sentence. Deleted "On and after January 1, 1971" from beginning of third paragraph.

Motor vehicle includes every self-propelled vehicle operated or suitable for operation on the highways, including an overweight or oversize vehicle operated on the highway under permit and a vehicle exempt from vehicle registration under the Vehicle Code, except vehicles used exclusively upon stationary rails or tracks.

A highway includes a way or place, of whatever nature, within the exterior boundaries of the State including a way or place within a Federal area, publicly maintained and open to the use of the public for purposes of vehicular travel, notwithstanding private participation in the maintenance of the way or place. It shall be presumed that a way or place is dedicated and accepted as a highway when it is recognized as a part of its maintained highway system by a proper public authority.

A way or place within a national or State forest which is entirely privately maintained, or a road over which forest products are transported in a national or State forest privately constructed or maintained pursuant to an existing agreement with the public authority having jurisdiction thereof will not be considered a highway notwithstanding the fact that it may be declared by the public authority to be a part of its road system. (See Regulation 1316—Exempt Uses of Fuel in Motor Vehicles.)

A way or place is not a highway within the meaning of Section 8605 of the Revenue and Taxation Code, during such times as it is closed by the governmental authority to the use of the public regardless of the purpose for which it is closed. A highway is open to the use of the public if vehicular travel is permitted although subject to traffic controls.

(a) a subhaul operator who uses his vehicle in the performance of subcontract services for another contract operator,

(b) the lessee of a vehicle who purchases and supplies fuel used in the operation of the vehicle,

(c) the lessee of a vehicle who is qualified in writing by the board as a user of fuel which is purchased and supplied by the lessor of the vehicle, or

(d) the lessor of a vehicle who purchases and supplies the fuel used in the operation of that vehicle by the lessee unless the lessee is qualified as the user under (c) above.

"The term user" does not include the government of the United States or an instrumentality thereof.

History: Effective October 1, 1957.

Amended November 1, 1989, effective January 28, 1990. Added paragraph (c) to the definition of "user" to provide that the term includes a lessee of a vehicle who is qualified in writing by the Board to be a user when the fuel is purchased and supplied by the lessor of the vehicle. Other minor changes made to provide for better readability and understanding by the public.

A fuel tank includes a separate compartment of a cargo tank used as a fuel tank and any auxiliary tank or receptacle of any kind from which fuel is supplied for the propulsion of the vehicle whether or not such tank or receptacle is directly connected to the fuel supply line of the vehicle.

"Vendor" includes a service station dealer, a broker or distributor as defined under the Motor Vehicle Fuel License Tax Law, and a user who sells fuel to others. "Vendor" also includes any person who sells fuel delivered into the fuel tank of a motor vehicle through a pump equipped with a key-lock meter which he supplies when he retains ownership of the fuel until it is withdrawn and placed in the fuel tank, notwithstanding that the fuel is placed in the fuel tank by the user. "Vendor" does not include a commission agent who makes no sales of fuel to users on his own account, who sells fuel title to which remains in the agent's principal until the fuel is delivered to the user, and who bills the user in the name, and on the invoice, of the principal for whom the agent sells the fuel. In such instances the agent's principal is the vendor.

(a) GENERAL. A vendor who wishes to conduct business separately at different locations will be issued a permit for each place of business upon the filing of an application for a permit for each location. The permit shall be conspicuously displayed at the place of business of the vendor where fuel is sold and delivered to users. If a vendor is the holder of a single permit and has more than one such place of business but does not wish to conduct business separately at each location, duplicate copies of the permit will be supplied by the Board so that the vendor may display the permit as required.

(b) INACTIVE PERMITS. Any person operating as a vendor of fuel in this State under the Use Fuel Tax Law must hold a valid vendor use fuel tax permit. Any person who is not operating as a vendor of fuel but who is holding a vendor use fuel tax permit must surrender the permit to the board for cancellation. The board may revoke the permit of any person found not to be operating as a vendor of fuel.

Upon either the discontinuance of operations as a vendor or the sale of the business, a permit holder shall notify the board of such discontinuance or sale and physically deliver the permit to the board for cancellation. To be acceptable, the notice of the discontinuance or sale of the business must be received by the board in one of the following ways:

(1) Either an oral or a written statement given to a board representative accompanied by delivery of the permit. If the permit is lost, destroyed, or otherwise unavailable for delivery to the board, the notice of discontinuance or sale must be in writing.

(2) Receipt by the board of the application for a vendor's permit from the successor of the business. Such application will serve to put the board on notice of the discontinuance of operations as a vendor by the predecessor.

Notice to another state agency of the discontinuance of operations or the sale of a business does not constitute notice to the board.

(c) PREDECESSOR LIABILITY. Unless the permit holder who sells, donates, trades or otherwise transfers a business notifies the board of such transfer and delivers the permit to the board for cancellation as provided in paragraph (b) above, he or she will be liable for taxes, interest, and penalties (excluding penalties for fraud or intent to evade the tax) incurred by the successor who, with the transferor's actual or constructive knowledge, uses the permit in any way, e.g., displays the permit in the successor's place of business or files returns with the board in the name of the predecessor. The amount of the liability of the predecessor shall include all taxes, interest, and penalties incurred by the successor up to the time the board receives notice of the sale as provided herein. However, at its discretion, the board may relieve the predecessor from liability for penalties incurred by the successor.

A successor may, under certain conditions, be liable for tax, interest, and penalties incurred by a predecessor as explained in Regulation 1334, Successor's Liability (18 CCR 1334).

History: Effective October 17, 1959.

Amended July 31, 1991, effective 10/19/91. Amended pursuant to Chapter 768, Statutes of 1989. Paragraph (a), generally (previously the only paragraph) changed to clarify procedure for single permitholder having more than one location who does not want to conduct business separately at each location. Added paragraph (b) to provide that a vendor use fuel tax permit may be held only by a person actively engaged in the business as a vendor of fuel taxable under the Use Fuel Tax Law. Also added notice requirements.

The tax does not apply with respect to that fuel which the user establishes to the satisfaction of the board is used:

(a) In the operation of a motor vehicle off the highway. "Off the highway" includes private property, a way or place permanently or temporarily closed to public use for the purpose of vehicular travel, or any way or place used for vehicular travel which is not a highway as defined in Regulation 1303.

A vehicle is operated upon a highway if it moves any distance in the general direction of the highway, whether upon the paved or unpaved portion thereof. An operation is not conducted upon a highway when a vehicle is operated thereon only for the purpose of crossing the highway from private property on one side to private property directly on the other and the vehicle is not operated for any distance in the general direction of the highway in making the crossing.

(b) In the operation of a motor vehicle on any highway which is under the jurisdiction of the United States Department of Agriculture and with respect to the use of such highway the user pays, or contributes to, the cost of construction or maintenance thereof pursuant to an agreement with, or permission of, that agency. "Highway which is under the jurisdiction of the United States Department of Agriculture" (hereafter referred to as U.S.D.A.) includes a way or place in the Forest Service road system within a National Forest, or partly within the National Forest and partly on private property, but does not include a state or county highway traversing the National Forest.

A user who "pays, or contributes to the cost of construction or maintenance" includes any user who shares in the cost of construction or maintenance of a highway with respect to the use of which the exemption is claimed, either directly as a party to a joint construction or maintenance agreement with U.S.D.A., or indirectly through any person who is a party to such an agreement. "Pays or contributes", in addition to monetary payments or contributions, includes: (1) the bearing in whole or in part of the cost of construction or maintenance by the user who performs the work himself or by his employment of others to perform the work; or (2) the sharing of the cost of construction or maintenance indirectly by any person who contracts with a party to such an agreement to perform transportation by motor vehicle upon such U.S.D.A. highway, or any subcontractor of such contractor who makes a like use of the highway, when the share amount of the contribution is specified in the contract between the respective contracting parties, notwithstanding that such amount may be reflected in a lump sum rate of compensation for the transportation service or transportation and logging or other services.

Any user claiming exemption from tax with respect to fuel used on a highway which is under the jurisdiction of the U.S.D.A. shall also keep records to show a description of the highway and route traveled thereon, and the amounts paid or contributed directly or indirectly for the cost of construction or maintenance of the highway pursuant to an agreement with the U.S.D.A. When a motor vehicle is operated partly on such highway and partly on a highway of this state or any political subdivision thereof, the gallonage of fuel used in operations on the U.S.D.A. highway for which exemption is claimed may be determined: (1) in the proportion that the miles operated on such highway bears to the sum of the miles operated thereon and the miles operated upon any other highway; or (2) by computing the gallonage of fuel used on the U.S.D.A. highway by dividing a miles per gallon rate into the total miles operated on the U.S.D.A. highway. The miles per gallon rate shall be determined by a fuel consumption test made under typical operating conditions and subject to approval of the Board.

(c) In the operation of an implement of husbandry, truck or farm tractor which is used in agricultural operations off the highway and only incidentally operated upon a highway in moving between farms or parts of farms which are in close proximity and which vehicles are exempt from registration under the Vehicle Code.

(d) In the operation of any construction equipment while operated within the confines or limits of a construction project and only incidentally operated on the highway within such confines or limits and which equipment is exempt from registration under the Vehicle Code. As used in this subsection and subsection (c) above, "incidentally operated" does not include the use of agricultural vehicles or special construction equipment for the transportation of persons or property upon the highways in an operation which would require registration of the vehicle under the Vehicle Code.

(e) For a purpose other than the generation of power to propel a motor vehicle on a highway, including fuel used to drive power take-off equipment to turn a rotary cement mixer, or to operate an air conditioner or garbage compressor.

(f) Any user claiming exemption from tax under this regulation shall accurately maintain adequate records to show the operations claimed to be exempt including the miles traveled and fuel used in order to establish to the satisfaction of the Board that the user is entitled to the exemption.

The tax paid to a vendor in this State may be applied by the purchaser as a credit against the tax due from the purchaser on all fuel used in this State in the reporting period in which the fuel, with respect to which the tax was paid to the vendor, was used.

The amount of credit allowable is the amount of tax separately stated or included in the selling price on the receipts (invoices) issued by the vendor to the purchaser for purchases of fuel delivered into vehicle fuel tanks. No tax credit may be taken for unauthorized payments of the tax on fuel delivered into a storage facility other than a vehicle fuel tank. To be entitled to the credit, a purchaser shall retain for inspection by the Board all receipts (invoices) given by vendors showing the amount of tax paid or included in the selling price, together with evidence of payment.

If within a reasonable period of time the purchaser has accumulated surplus credits which have not been applied to payment of tax liability under Section 8651 of the Revenue and Taxation Code, or if the purchaser ceases to be a user in this State, a claim for refund as provided in Sections 9152 and 9153 of said code should be filed. All claims for refund of overpayments shall be accompanied by the receipts (invoices) obtained by the purchaser from the vendor and evidence of payment.

Amended December 9, 1998, effective May 20, 1999. Deleted references to "wholesaler" and "month", and replaced "him or her" with "purchaser". Replaced "shown" in first sentence of second paragraph with "separately stated or included in the selling price", and added "or included in the selling price" after "tax paid" in last sentence of second paragraph.

(a) GENERAL. The vendor is required to collect and is liable for the amount of the tax on fuel sold and delivered into fuel tanks of motor vehicles, except any vehicle (a) operated by the Government of the United States or any instrumentality thereof, (b) operated interstate as authorized by Regulation 1319, (c) operated by a user who qualifies for the exemption provided in Revenue and Taxation Code section 8655 as authorized by Regulation 1319, or (d) operated exclusively on private property as authorized by Regulation 1320. A vendor is not authorized to collect the tax on fuel delivered into a storage container other than a vehicle fuel tank. The amount of tax required to be collected constitutes a debt owed by the vendor to the state.

Except as may otherwise be provided by the board, a vendor who sells and delivers fuel into the fuel tank of a motor vehicle shall collect the tax notwithstanding that the user may claim exemption from the tax in his returns to the board for any nontaxable use of the fuel.

As respects a vendor's tax reporting, the tax is deemed to have been collected at the time of the sale irrespective of when payment for the amount of the invoice, including the tax, is received by the vendor. Failure to collect the tax from the purchaser (user) does not relieve the vendor from his liability to pay to the state the amount of the tax required to be collected, except that bad debt losses are deductible under circumstances described in Section 8732.5 of the Revenue and Taxation Code and Regulation 1331.6.

(b) FUEL SOLD THROUGH KEYLOCK OR OTHER UNATTENDED MECHANISMS. When fuel is sold through a keylock mechanism or other unattended mechanism it shall be presumed that the vendor delivered the fuel into the fuel tank of a motor vehicle and the vendor must collect the tax from the user. Farm and construction equipment are motor vehicles if they are suitable for operation on the highway. This includes most equipment running on rubber tires. Section 8652 of the Revenue and Taxation Code provides an exemption to farm and construction equipment users, but not to vendors delivering fuel into the fuel tanks of such vehicles. Customers fueling such equipment as rubber-tired backhoes, road graders, or farm tractors must pay the use fuel tax to the vendor when delivery is made through keylock pumps even if the equipment is hauled into the station on a trailer and the ultimate use of the fuel is exempt.

The presumption that fuel sold through a keylock or other unattended mechanism is delivered into the fuel tank of a motor vehicle shall be rebutted and the vendor shall not collect the tax if the user certifies in writing to the vendor that all fuel delivered to him through a specific mechanism will be delivered into bulk containers. If a customer puts fuel into the fuel tank of a motor vehicle and places fuel into drums or other bulk containers at the same keylock station, the vendor should assign the customer two meter registers. The customers then may furnish the vendor with a certificate that all fuel delivered through a specified meter register will be delivered into bulk containers. Regulation 1320 may not be applied to fuel deliveries through keylock or other unattended mechanisms unless the mechanism is located where the vehicle is operated exclusively off the highway. Regulation 1319 is applicable to keylock deliveries only in situations specified in that regulation and to the same extent as if the vendor made the delivery into the fuel tank of the vehicle personally.

(c) SALES TO PERSONS WHO PAID THE ANNUAL FLAT RATE TAX. Any vendor who sells and delivers liquefied petroleum gas, liquid natural gas or compressed natural gas into the fuel tank of a vehicle with respect to which the owner or operator has paid the annual flat rate fuel tax and which bears the current year's identification emblem provided for in Regulation 1325 is not required to collect the tax with respect to such fuel. The vendor must retain for each sale or delivery claimed to be exempt records showing (a) the type and quantity of fuel sold or delivered, (b) the date of the sale or delivery, (c) the serial number of the identification emblem affixed to the vehicle pursuant to Regulation 1325 and (d) the license number of the vehicle.

(d) OVERCOLLECTIONS BY VENDOR. If with respect to fuel tank deliveries the vendor collects from any user a greater amount of tax than that which is required to be collected, he shall remit the full amount collected to the board, since the user is entitled to a credit or a refund from the state. If the vendor improperly collects the tax on deliveries of fuel into storage facilities other than vehicle fuel tanks, the amount of tax so collected shall be refunded by the vendor to the user purchasing the fuel.

As respects a vendor's tax reporting, the tax is deemed to have been collected at the time of the sale irrespective of when payment for the amount of the invoice, including the tax, is received by the vendor. Failure to collect the tax from the purchaser (user) does not relieve the vendor from his liability to pay to the state the amount of the tax required to be collected, except that bad debt losses are deductible under circumstances described in Section 8732.5 of the Revenue and Taxation Code and Regulation 1331.6.

History: Effective October 1, 1957.

Effective October 1, 1959.

Amended effective December 12, 1963.

Amended effective October 12, 1966.

Amended December 8, 1970, effective January 15, 1971.

Amended November 19, 1975, effective January 1, 1976.

Amended February 6, 1980, effective March 29, 1980. Added subsection letters and headings: (a) is former first, fifth and fourth paragraphs; (b) is a new subsection; (c) is former second paragraph; and (d) is former third paragraph.

(b) operates a motor vehicle within and without the state, or qualifies for the exemption provided in Revenue and Taxation Code Section 8655, and

(c) purchases in the state for such operation fuel delivered into the fuel tank of such vehicle in quantities that would result consistently in payment of substantially more tax to vendors than the tax that would be imposed with respect to fuel used in the operation of the vehicle within this state may secure from the board an authorization which will permit the vendor of the fuel so purchased to sell and deliver such fuel into the fuel tank of the vehicle without collecting the tax from the user.

To secure the authorization the user shall apply to the board therefor, furnishing a description of his operations sufficiently detailed to demonstrate to the board that, in the absence of such authorization, the amount of tax which would be paid by the user to vendors would exceed that measured by the fuel consumed in the operation of the vehicle in this state so that an overpayment of fuel tax by the user may be expected to occur consistently.

Each user purchasing fuel in pursuance of this regulation without payment of the tax to his vendor shall certify to the vendor that the user has complied with this regulation and has secured authorization from the board so to purchase the fuel. The certificate shall contain the use fuel tax permit number of the user, together with his name and address. A single certificate may cover transactions occurring after it has been furnished to the vendor so long as the authorization remains in full force and effect.

A user whose use of fuel is exempt from the tax under Section 8653 because of the operation of his vehicle exclusively off the highway, may be authorized by the Board to purchase fuel without payment of the tax to the vendor when the vendor delivers the fuel into the fuel tank of the user's vehicle at the location where the vehicle is operated exclusively off the highway. The user shall submit evidence satisfactory to the Board that he is eligible for the exemption and the authorization.

The user shall execute and furnish to each vendor from whom fuel is purchased a certificate for all fuel purchased without payment of the tax to the vendor pursuant to the authorization of the Board. The certificate shall be in form substantially as follows:

"The purchaser hereby certifies that he is the holder of valid California Use Fuel Tax Permit Number ________________; that he has been issued authorization by the State Board of Equalization permitting the purchase of fuel delivered into the fuel tanks of vehicles operated by him exclusively off the highway without paying the tax to the vendor; that the use of the fuel so purchased is exempt from the Use Fuel Tax under Section 8653 of the Revenue and Taxation Code.

Liquefied petroleum gas dealers who operate motor vehicles propelled by liquefied petroleum gas subject to the Use Fuel Tax shall be allowed exemption from the tax under the provisions of Sections 8607 or 8652 of the Revenue and Taxation Code for the gallons of fuel used in pumping operations involved in unloading liquefied petroleum gas from the cargo tanks of the vehicles.

If a pump is operated by power take-off from the engine of a motor vehicle which is propelled by liquefied petroleum gas and the cargo tank of the vehicle has a water capacity of not greater than 2,500 gallons, the allowance for the fuel used in pumping shall be at the rate of 11/2 gallons per 1,000 gallons of fuel pumped.

If the user establishes to the satisfaction of the Board by test checks of fuel used in pumping made under typical operating conditions that rates of fuel consumption for the operation of his pumps are greater per 1,000 gallons of fuel pumped than the rate herein provided, the Board may allow deductions for pumping at the greater rates so determined.

If the pump is operated by power take-off from the engine of the motor vehicle propelled by liquefied petroleum gas and the cargo tank of the vehicle has a water capacity greater than 2,500 gallons, the user shall establish the pumping allowance by test checks made under typical operating conditions.

All tests made by the user will be subject to review by the Board. All detail and test data should be retained for inspection by the Board.

History: Effective March 22, 1962.

Amended December 9, 1998, effective May 20, 1999. Deleted "or diesel fuel" after "petroleum gas" in first and fourth paragraphs.

Users who operate motor vehicles powered by liquefied petroleum gas supplied directly to the engine from the cargo tank of the motor vehicle are authorized for the purpose of making tax returns to compute the gallons used on a mile-per-gallon basis. The mile-per-gallon basis will be determined by tests. The tests will be made by the user and will be subject to review by the Board. All detail and test data should be retained for inspection by the Board.

This method of computing use is authorized only for the purpose of making tax returns. Determinations may be imposed or refunds granted, if the Board upon audit of the user's accounts and records, or upon the basis of tests made or other information determines that the return did not disclose the proper amount of tax due. See Regulation 1332 with respect to records on those motor vehicles powered by fuel not supplied directly to the engine from the cargo tank.

(a) DEFINITIONS. Except where the context otherwise requires, the following definitions govern the construction of this regulation:

(1) "Transit service" means and is limited to:

(A) The common carriage of passengers by motor vehicle for compensation on an individual fare basis between fixed termini or over a regular route on any line or lines in urban and suburban areas or between cities in close proximity, or on any line or lines owned and operated by a transit district, transit authority, or city.

(B) The carriage of passengers by motor vehicle by a transit district, transit authority, or city in conformance with a demand-responsive transportation service.

(C) The carriage of persons by motor vehicle by any private entity providing transportation services as a transit operator as defined in subdivision (a)(2)(B) or (a)(2)(F) of this regulation.

(2) "Transit operator" includes the following:

(A) Any transit district, transit authority, or city owning and operating a transit system and engaging in transit services itself or through a wholly-owned nonprofit corporation.

(B) Any private entity providing transportation service under a contract or agreement, other than a general franchise agreement, entered into after September 26, 1978, with a public agency authorized to provide public transportation services. The provisions of subdivision (b) of this regulation shall apply only with respect to fuels consumed by that private entity while providing service under such contract or agreement.

(C) Any passenger stage corporation as defined in Section 226 of the Public Utilities Code, engaging in local transit service subject to the jurisdiction of the Public Utilities Commission, when the motor vehicles of such passenger stage corporation are exclusively operated in urban or suburban areas or between cities in close proximity for the transportation of persons for hire, compensation, or profit; provided, however, that the exemption is not extended to any line or lines operated by such passenger stage corporation which shall exceed 50 miles of one-way route mileage. As defined in Section 226 of the Public Utilities Code, "passenger stage corporation" includes every person engaged as a common carrier for compensation, in the ownership, control, operation or management of a passenger stage over any public highway in this state between fixed termini or over a regular route except:

1. those whose operations are 98 percent or more exclusively within the limits of a city; or

2. those whose operations consist solely in the transportation of bona fide pupils attending an institution of learning between their homes and such institutions; or

3. that part of the passenger stage operations of any person, whether between fixed termini or over a regular route or otherwise, engaged in the transportation of any pupils or students to or from a public or private school, college or university, or to or from activities of a public or private school, college or university, where the rate, charge or fare for such transportation is not computed, collected or demanded on an individual fare basis.

(D) Any common carrier of passengers operating exclusively on any line or lines within the limits of a single city between fixed termini or over a regular route, 98 percent or more of whose operations, as measured by total route mileage operated, are exclusively within the limits of a single city, and who by reason thereof is not a passenger stage corporation subject to the jurisdiction of the Public Utilities Commission.

(E) Any school district, community college district, or county superintendent of schools owning, leasing, or operating busses for the purpose of transporting pupils to and from school and for other school or college activities involving pupils, including, but not limited to, field trips and athletic contests.

(F) Any private entity providing transportation services for the purposes specified in (a)(2)(E) under contract or agreement entered into after October 1, 1984, with a school district, community college district, or county superintendent of schools. The provisions of subdivision (b) of this regulation shall apply only with respect to fuels consumed by that private entity while providing service under such contract or agreement.

(3) "City" includes and is limited to a chartered city, or a general law city incorporated or organized under laws of this state.

(4) "Urban area" means any area which lies within a city, or within an unincorporated residential, commercial, or industrial area, and which does not fall within the definition of suburban area as herein defined.

(6) "Close proximity" as applied to cities means that they, or their suburban areas, are contiguous to, adjacent to, in the immediate vicinity of, or adjoining each other. It is unnecessary that the city boundaries or their suburban areas touch in order for the cities to be in close proximity.

(7) "Public agency" includes any transit district, transit authority, county, city, city and county, this state and any agency of this state.

(b) APPLICATION OF TAX. A transit operator is exempt from use fuel tax with respect to fuel used for the propulsion of motor vehicles when operated in transit service. The operator must pay one cent for each gallon of such exempt fuel used. These payments shall be treated as a tax imposed under the use fuel tax law. The full rate of tax applies to the use of such fuels for the propulsion of motor vehicles in operations other than in transit service. The exemption does not apply to fuel used by a passenger stage corporation in passenger stage operations over any line or lines:

(1) The one-way mileage of which exceeds fifty miles, or

(2) The one-way mileage of which is less than fifty miles, if the operations are not exclusively within urban or suburban areas or between cities in close proximity.

(c) RECORDS. A transit operator claiming the partial exemption from the use fuel tax under (a)(2)(B) or (a)(2)(F) above, must retain all relevant contracts and other documentary evidence to support the claimed exemption. The operator shall maintain records of fuel consumed in contract operations. If the same vehicles are used for charter or any other purpose when not required for contract runs, the operator shall maintain records sufficiently detailed to support the exempt portion of the fuel consumed. For example, if the operator computes the exemption based upon mileage driven, the operator shall maintain records of each trip, total mileage, and the mileage the vehicle is operated while providing services under such contracts or agreements.

If an overpayment of use fuel tax is expected to occur consistently, a transit operator may apply for authorization from the Board to purchase fuel without payment of tax to vendors as specified in Regulation 1319.

History: Adopted October 10, 1968.

Amended December 6, 1968, effective January 8, 1969.

Amended July 8, 1971, effective July 20, 1971.

Amended December 12, 1973, effective January 18, 1974.

Amended June 28, 1977, effective August 21, 1977. Section (a)(1) amended to include any lines operated by a local governmental authority. Effective without limitation as to retroactive effect.

Amended November 15, 1979, effective January 5, 1980. Implements amendments to R&TC Section 8655 made by Chapter 1140 Statutes 1978 which extends the partial exemption from use fuel tax to private entities providing transportation services under contracts with certain public agencies.

Amended October 7, 1987, effective December 23, 1987. In subdivision (a)(1)(C), excluded from definition of "Transit Service" charter-party passenger carrier service. Also deleted definition of charter-party passenger carrier service. Added subdivision (a)(2)(E) to include certain school entities that are exempted from tax by the Legislature. Added subdivision (a)(2)(F) which exempts from tax certain private entities providing transportation services to school entities as defined in subdivision (a)(2)(E).

Amended December 9, 1998, effective May 20, 1999. Deleted "city and county, or county" after "city" in subdivision (a)(1)(A), (a)(1)(B), (a)(2)(A), (a)(2)(c)1. And (a)(3). Moved definition of "public agency" from subdivision (a)(2)(B) to new subdivision (a)(7). Deleted "diesel or liquefied petroleum gas" after "respect to" in subdivision (b).

(a) IN GENERAL. In lieu of paying the use fuel tax on the basis of the number of gallons used, the owner or operator, except an interstate user, of a motor vehicle propelled by a system using liquefied petroleum gas, liquid natural gas, or compressed natural gas, who operates the motor vehicle exclusively within the State, may elect to pay the fuel tax for the use of such fuels on an annual flat rate basis according to the following fee schedule:

Unladen weight

Fee

All passenger cars and other vehicles 4,000 lbs. or less

$36

More than 4,000 lbs. but less than 8,001 lbs.

$72

More than 8,000 lbs. but less than 12,001 lbs.

$120

12,001 lbs. or more

$168

The flat rate fee is an annual tax. The annual period shall be that period from the end of the month in which the tax was paid to the end of the month prior in the following calendar year. When an owner or operator elects to pay the annual flat rate fuel tax on more than one vehicle, the owner or operator may request that the board prorate the tax due on a vehicle added during the annual period, so that all vehicles have the same annual period. In the year a vehicle is added, the annual flat rate fuel tax for that vehicle shall be calculated by dividing the fee by 12 and multiplying the resulting amount by the number of months remaining before the beginning of the next annual period.

(b) IDENTIFICATION DECAL. Any person who desires to pay the annual flat rate tax under this regulation must secure a use fuel tax permit, pay the required tax to the board, and obtain from the board an identification decal for each vehicle with respect to which the annual flat rate tax has been paid. The decal shall be affixed to the vehicle by an agency or person authorized by the board. The decal shall not be transferred to another vehicle.

(c) ANNUAL RETURNS. Any person may file annual use fuel tax returns if the only use of fuel of a kind taxable under the Use Fuel Tax Law is in vehicles with respect to which the annual flat rate fuel tax fee has been paid for the period during which the vehicle is operated. Any person authorized under this regulation to file returns on an annual basis and who uses fuel subject to the tax (other than fuel purchased tax paid and used in a private passenger automobile) shall advise the board of such use prior to the last day of the month following the month in which the taxable use occurred. The board may require such person to file returns on other than an annual basis.

History: Adopted November 19, 1975, effective January 1, 1976.

Amended August 24, 1988, effective November 11, 1988. In subdivision (a) amended to include provisions clarifying the option of certain owners or operators of vehicles to pay tax based on gallons used or on a flat rate basis.

Amended December 9, 1998, effective May 20, 1999. In first sentence of subdivision (a), added "except an interstate user" after "operator", "motor" before "vehicle", and "who operates the motor vehicle exclusively within the State" after "natural gas". Deleted "The period for which the annual fee payment shall apply will be any twelve month period beginning with the month in which payment is made" after first sentence of second paragraph a, and added "The annual period shall be . . . " Replaced "emblem" with "decal" in subdivision (b).

Each user of fuel except a user whose sole use of fuel is for the propulsion of a privately operated passenger automobile as provided in Regulation 1331.1 is required to file a return for each calendar quarter (or each reporting period if required by the Board to make a return and payment of tax for other than quarterly periods) on a form prescribed by the Board. A return shall be filed with the Board for each quarter (or reporting period) even though no fuel was used during, or tax is due for, the quarter (or reporting period).

Failure to receive a return form does not relieve the user from the obligation of making a return to the Board on or before the due date. If a return form is not received, a user may make a written return to the Board setting forth the name, address, permit number, number of gallons of fuel used, and quarter for which the return is due. The return together with a remittance payable to "State Board of Equalization" for the amount of tax due shall be filed with the Board on or before the due date and will be accepted in lieu of a return on the prescribed form.

History: Effective October 17, 1959.

Amended effective December 12, 1963.

Amended effective October 12, 1966.

Amended July 8, 1971, effective July 20, 1971.

Amended December 9, 1998, effective May 20, 1999. Replaced references to "month" or "monthly" with "quarter" or "quarterly". Deleted last paragraph, relating to interstate users.

(a) GENERAL. Any person whose sole use of fuel is for the propulsion of a privately operated passenger automobile, commercial vehicle with unladen weight of less than 7,000 pounds, a privately operated two-axle truck which the user has leased for a period of 30-days or less or a motor vehicle that is not a qualified motor vehicle operated by an interstate user in this State, in connection with an interstate trip is not required to secure a use fuel tax permit and is excused from the filing of a use fuel tax return with the board when either of the following conditions is met:

(1) all fuel used in this state, except fuel brought into the state in the fuel tank of the vehicle, is purchased from a vendor in California who collects the tax from the user when delivering the fuel into the fuel tank of the user's vehicle, or

(2) that the flat rate fuel tax described in Regulation 1325 has been paid.

(b) DEFINITIONS.

(1) "Privately operated passenger automobile" includes a station wagon, but does not include a motor vehicle used for the transportation of persons for hire or compensation or designed, used, or maintained primarily for the transportation of property. A pickup truck used as an automobile for the private transportation of persons without the owner receiving compensation or profit for the transportation, is deemed to be a privately operated passenger automobile within the meaning of Section 8608 and Section 8752 of the Revenue and Taxation Code.

(2) "Commercial vehicle with unladen weight of less than 7,000 pounds" includes pickup trucks and other vehicles with an unladen weight of less than 7,000 pounds licensed as commercial vehicles.

(3) "Privately operated two-axle truck" means a two-axle truck in which the user does not transport persons or property for hire or compensation.

In determining whether a two-axle truck is leased for 30-days or less, the total number of consecutive days for which the same or a comparable vehicle is leased to the same lessee shall be counted. If the total number of such days exceeds 30, the truck, or trucks, shall be deemed leased for more than 30-days.

(c) USE OF FUEL IN MORE THAN ONE PRIVATELY OPERATED VEHICLE. If the conditions set forth in this regulation are met the user is not required to secure a use fuel tax permit and is relieved of filing of the use fuel tax returns even though the user operates more than one such vehicle using fuel subject to the use fuel tax. This is true whether or not the vehicle is, or the vehicles are, used for pleasure or in a business or profession, providing that the user is not also using such fuel in other motor vehicles which are not of the kind described in subdivision (a) of this regulation.

(d) PERMIT AND RETURNS REQUIRED IF FUEL FROM BULK STORAGE IS USED. Notwithstanding that a user's sole use of such fuel is in a vehicle of the kind described in subdivision (a) of this regulation or in a vehicle for which the flat rate fuel tax has been paid, the user must secure a permit and file use fuel tax returns if he is using such fuels from bulk storage acquired exempt from the use fuel tax.

History: Effective October 12, 1966.

Amended December 8, 1970, effective January 15, 1971.

Amended June 11, 1974, effective July 12, 1974.

Amended November 19, 1975, effective January 1, 1976.

Amended December 6, 1978, effective January 28, 1979. Amended and assigned subsection letters (a) through (d) to the first four paragraphs, replaced the fifth paragraph with (e).

Amended July 27, 1983, effective October 12, 1983. Added "Small Commercial Vehicles" to title. Added language relating to commercial vehicles to first paragraph of (a) and deleted "automobile" and inserted "vehicle" in last sentence of that subdivision. Added (2) and (3) to subdivision (b). Deleted "Passenger" following "Operated" from title of subdivision (c). Deleted "first paragraph" from references and inserted "such vehicle", "vehicle", or "vehicles". Deleted subdivision (e).

Amended March 6, 1985, effective May 31, 1985. In subdivision (a) the vehicle weight is changed to 7,000 pounds from 6,000 pounds. In subdivision (b)(2), the weight is changed from 6,000 to 7,000 pounds.

If a vendor is required to make returns and pay weekly the tax required to be collected, he shall make his weekly return on Form BT-401-V5, Vendor Use Fuel Tax Weekly Return.

The return for each calendar week shall be filed with the Board on or before Wednesday of the following week and shall be accompanied by a remittance for the amount of tax due.

The making of weekly returns and payments does not relieve the vendor of the obligation to make a monthly return of all tax which he has been required to collect during the month. To the extent that the tax liability shown by the monthly return has been prepaid by payments accompanying weekly returns, no further payment need accompany the monthly return. Whenever a week falls in two calendar months the amount of the tax collected during the portion of the week falling in each calendar month shall be stated separately in the return, but the return may be accompanied by a single remittance for the total tax collected during the week.

The amount of tax reported and paid by a vendor which is included in an account found to be worthless and charged off for income tax purposes, may be taken as a credit against the tax due on the use fuel tax return of the vendor. Allowance of the credit is subject to the limitation period prescribed in Section 8782 of the Revenue and Taxation Code and the other provisions of this regulation.

The right to the tax credit arises in the month in which the account is found to be worthless and charged off for income tax purposes. The credit should be taken on the return for the period in which the right to the credit arose. Failure to take this credit in the proper period will not prevent the allowance of a credit of the amount of tax for which the vendor was entitled to credit under this section.

A vendor using the reserve method to account for bad debts for income tax purposes should take the credit on the return for the period in which the account is found to be worthless and charged against the reserve.

No tax credit is allowable for any portion of a debt recovered that is retained by or paid to any person as compensation for his or her services or expenses in collecting the account.

If any account with respect to which credit has been taken is subsequently collected, in whole or in part, the vendor shall apply the amount collected ratably to the charges for the fuel and the tax thereon. If the purchaser is indebted to the vendor with respect to other items also charged off as bad debts, payments made on account thereof shall first be credited to the charges for the fuel and the tax thereon unless the purchaser shall specify otherwise. The tax thus collected shall be included in the return due for the period in which the collection is made and must be remitted to the Board within the time prescribed for payment of the tax due for that period.

Whenever any charge arising from the sale of fuel remains unpaid for a period of 90 days after the close of the calendar month in which the sale is made, or the account is found to be uncollectible prior to 90 days after the close of the calendar month in which the sale is made, that indebtedness is a delinquent account as to which the vendor shall report to the Board as herein specified. For the purpose hereof the date of the delivery invoice is deemed the date of sale.

The vendor shall file with each use fuel tax return a schedule listing the names and addresses of all purchasers whose accounts became delinquent within the meaning of the preceding paragraph as of the close of the reporting period for which the return is filed and remain unpaid at the time of such filing. The listing shall be accompanied by a notice of delinquent account on a form prescribed by the Board.

When the account of the purchaser is no longer delinquent or amounts remaining unpaid for over 60 days have been cleared and the vendor satisfied that the remainder of the account will be paid, the vendor should complete the triplicate and quadruplicate of the Notice of Worthless Account (Bad Debts) form prescribed by the board by indicating the payments received. The triplicate (pink) of the Notice of Worthless Account (Bad Debts) form should be forwarded promptly to the Board.

Failure to list a delinquent account as herein required shall constitute a waiver of the credit that might otherwise be allowable for the amount of the delinquency under Section 8732.5 of the Revenue and Taxation Code in the event that the account is later found to be worthless.

(a) GENERAL. A taxpayer shall maintain and make available for examination on request by the board or its authorized representatives, records in the manner set forth at California Code of Regulations, Title 18, Section 4901.

(b) SPECIFIC APPLICATIONS. In addition to the record keeping requirements set forth in subdivision (a), vendors and users of use fuel shall comply with the following requirements.

(1) VENDOR'S RECORDS. A vendor shall maintain complete records of all sales or other dispositions including self-consumed fuel, inventories, purchases, receipts, and tank gaugings or meter readings, of liquefied petroleum gas, and any other fuel the use of which is subject to the use fuel tax.

(2) VENDOR'S SALES INVOICES. The vendor shall prepare a serially numbered invoice for each sale of fuel whether the fuel is sold for use in motor vehicles or for other uses. A single invoice covering multiple deliveries of fuel made during a period of time not to exceed a calendar month shall constitute an invoice for each sale. If the multiple delivery invoice includes tax-exempt deliveries either into a bulk storage facility or into fuel tanks of motor vehicles with respect to which the vendor is excused from collecting the tax as provided in Regulations 1319 and 1320, and deliveries into fuel tanks of motor vehicles upon which the tax is required to be collected, the invoice shall contain or be accompanied by a statement showing separately the deliveries and gallonage upon which the tax is collected and the tax-exempt deliveries and gallonage. The invoice shall be delivered to the purchaser, and a copy thereof shall be retained by the vendor.

A sales invoice shall contain the following information:

(A) The name and address of the vendor.

(B) The date of sale.

(C) The number of gallons or units of fuel sold, the price per gallon or unit and the total amount of the sale.

(D) The amount of the use fuel tax collected, if delivery is into a fuel tank of a motor vehicle; however, the amount of the tax collected need not be separately stated if the invoice bears the notation that the price includes the tax.

(E) For single deliveries of less than 250 gallons or units, the type of receptacle, other than a fuel tank of a motor vehicle, into which the vendor delivered fuel without collecting the use fuel tax (e.g., storage tank, crawler tractor, drum, stationary generator). On machine-prepared invoices, reasonable code designations will be acceptable in lieu of such description.

The sales invoice shall upon payment by the purchaser constitute a receipt for the amount of use fuel tax included therein collected by the vendor.

(3) USER'S RECORDS. Users of fuel subject to the tax shall obtain from the vendor of the fuel and retain in their files an invoice for each delivery of such fuel into the fuel tank or tanks of each vehicle operated by them and for each delivery into their bulk storage tank or tanks. These invoices shall set forth the information specified in subsection (b)(2) of this regulation and shall be filed or identified in a systematic manner so that they may readily be traced into their purchase or expense records and into their returns to the Board.

Users should keep as part of their records a detail of figures upon which are based the totals set forth on their returns to the Board. When fuel is placed into the fuel tank of a qualified motor vehicle, either the user or the vendor should identify on the invoice the qualified motor vehicle into which the fuel was placed. All individual invoices supporting charge accounts which include purchases of fuel shall be retained by the user in such manner as to enable the representatives of the Board to establish the identity of all the merchandise or service included in the total charge and the specific gallonage of fuel purchased.

In addition to the records prescribed above, a lessor of a vehicle who is a user as defined under Regulation 1304(d) (18 CCR 1304(d)) shall maintain records of each trip or the mileage the vehicle is operated by the lessee.

History: Effective January 1, 1949.

Revised effective October 1, 1957.

Amended effective December 12, 1963.

Amended July 8, 1971, effective July 20, 1971.

Amended effective June 10, 1994, to delete references to gender based language, add California Code of Regulation citation, and update the section reference in Regulation 1304.

Amended February 5, 2003, effective May 28, 2003. The underscored citation indicates an electronic hyperlink to the cite. Common administrative provisions for special taxes programs have been consolidated in Chapter 9.9 Special Taxes Administration. General record keeping requirements can be found at the cite referenced in subdivision (a). Subdivision (b) has been added to identify additional record keeping requirements for vendors and users of use fuel.

(a) WHEN DUTY TO WITHHOLD PURCHASE PRICE ARISES. The requirement that a successor or purchaser of a business or stock of goods withhold a sufficient amount of the purchase price to cover the tax liability of the seller arises only in the case of the purchase and sale of a business or stock of goods under a contract which provides for the payment to be made to the seller or to a person designated by the seller of a purchase price consisting of money, property or the assumption of liabilities or a combination of forms of consideration. The liability of the successor can be no more than the amount of the purchase price. This requirement does not arise in connection with other transfers of a business such as assignments for the benefit of creditors, foreclosures of mortgages, or sales by trustees in bankruptcy.

(b) AMOUNTS TO WHICH LIABILITY EXTENDS. The liability of the successor or purchaser of a business or stock of goods extends to taxes incurred with reference to the operation of the business by the predecessor or any former owner, including the sale thereof, even though not then determined against the former owner, to interest thereon to the date of payment of the taxes, to penalties for nonpayment of taxes, and to penalties for negligence or intentional disregard of the Use Fuel Tax Law or authorized rules and regulations, or for fraud or an intent to evade the tax determined and unpaid at the time of sale.

(c) RELEASE FROM OBLIGATION. The purchaser of the business or stock of goods will be released from further obligation to withhold the purchase price if the purchaser obtains a certificate from the board stating that no taxes, interest, or penalties are due from a predecessor. The purchaser will also be released if he or she makes a written request to the board for a certificate and if the board does not issue the certificate or mail to the purchaser a notice of the amount of the tax, interest, and penalties that must be paid as a condition of issuing the certificate within 60 days after the latest of the following dates:

(1) The date the board receives a written request from the purchaser for a certificate.

(2) The date of the sale of the business or stock of goods.

(3) The date the former owner's records are made available for audit.

The certificate may be issued after the payment of all amounts due under the Use Fuel Tax Law, according to the records of the board as of the date of the certificate, or after the payment of the amounts, including amounts not yet ascertained, is secured to the satisfaction of the board.

(d) ENFORCEMENT OF OBLIGATION. The liability is enforced by service of a notice of successor liability not later than three years after the date the board receives written notice of the purchase of the business or stock of goods. The successor may petition the Board for reconsideration of the liability within 30 days after service. The liability becomes final, and the amount due and payable, in the same manner as determinations and redeterminations of other use fuel tax liability.

(e) SEPARATE BUSINESS LOCATIONS. Where one person operates several business establishments, each at a separate location, each establishment is a separate "business" and has a separate "stock of goods" for purposes of determining the liability of a successor. A purchaser of the business or stock of goods of any such establishment is subject to liability as a successor with respect to that establishment even if he or she does not purchase the business or stock of goods of all the establishments.

(f) PURCHASE OF A PORTION OF A BUSINESS. A person who purchases a portion of a business or stock of goods may become liable as successor. For example, the purchaser may be liable where he or she purchases substantially all of the business or stock of goods or where the business or stock of goods is purchased by two or more persons. In cases of doubt as to possible liability, the purchaser should obtain a certificate as provided in (c) above.

History: Adopted January 11, 1989, effective April 15, 1989.

Amended May 19, 1992, effective July 31, 1992.

Amended subsection (d) to reflect statutory changes adopted in Chapter 74, Statutes of 1990, to require the Board to serve a notice of successor's liability within three years of the date the Board is notified of the purchase of a business or stock of goods. The amendments also: clarified subsection (a); corrected an error in subsection (c) by substituting "does not issue" for "issues" in the second sentence; made the language of the regulation gender neutral.

A person may be relieved from the liability for the payment of the use fuel tax, including any penalties and interest added to those use fuel taxes, when that liability resulted from the failure to make a timely return or a payment and such failure was found by the board to be due to reasonable reliance on written advice given by the board as described in California Code of Regulations, Title 18, Section 4902.

History: Adopted December 9, 1998, effective May 20, 1999.

Amended February 5, 2003, effective May 28, 2003. The underscored citation indicates an electronic hyperlink to the cite. Common administrative provisions for special taxes programs have been consolidated in Chapter 9.9 Special Taxes Administration. Requirements for relief from liability can be found at the referenced cite.

A spouse or registered domestic partner claiming relief from liability for the motor vehicle fuel tax, interest, penalties, and other amounts shall be relieved from such liability where all the requirements set forth in California Code of Regulations, title 18, section 4903 are met.

History: Adopted March 23, 2010, effective June 17, 2010.

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